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BUSINESS AND MANAGEMENT
Vol . 3, No.7, 20 14: 79 9-812
INVESTMENT DECISION BASED ON FINANCIAL PERFORMANCE
ANALYSIS AND MARKET APPROACH VALUATION
OF INDONESIAN CONSTRUCTION SECTOR
Rahmat Faikar Makarim and Ana Noveria
School of Business and Management
Institut Teknologi Bandung, Indonesia
rahmat.faikar@sbm-itb.ac.id
Abstract- Investment is one of the tools for a company in gaining additional capital. This research will seeks the
analysis of company financial performance and valuation as the fundamental tools in making investment decision
on Indonesia construction sector, represented by 5 listed construction sector companies, which are PT Adhi Karya
(ADHI), PT Wijaya Karya (WIKA), PT Nusa Konstruksi Enjiniring (DGIK), PT Total Bangun Persada (TOTL), and PT
Surya Semesta Internusa (SSIA). By analyzing the financial performance, could be obtained the financial health
condition of the company that will represent the company future to attract the investors. While the market
approach valuation is used to see whether the company is undervalued or overvalued. Due to the development of
Indonesia into a developed country, this sector has a high demand of work that make it always able to generate
high net sales and profit for the past few years. This makes this sector one of the most secure stock to investing in.
Moreover, the under value of their share price will give the investors possibilities of high return and probable
increase of stock price on the future.
Keywords: Construction sector, financial ratios, valuation, market approach, financial performance.
Introduction
Jakartaglobe.com stated that nowadays, construction stock sector is the market leader of
Indonesian stock market gains. Along with the series of infrastructure and development projects in
many big cities in Indonesia as the manifestation of the government’s multiyear Master Plan for the
Acceleration and Expansion of Indonesia’s Economic Development (MP3EI) since 2012. World bank
stated that on 2010 Indonesia is the 4th biggest population country, the population significantly rise
from 37.7% in 2003 towards 56.5% in 2010. This figures indicates a high residential needs in
Indonesia as a development country. With the increase of its populations, the numbers of
construction work demand for the public-infrastructure will also growing. In this case the availability
of construction sector business will be much needed, to facilitate the country growth. Despite of the
bright future of the industry, the competition inside the sector is not easy. There were about 44
construction or infrastructure companies in Indonesia and 5 of them have been listed for more than
5 years in Indonesia, which are PT. Wijaya Karya Beton Tbk. (WIKA), PT Adhi Karya Tbk. (ADHI), PT.
Nusa Konstruksi Enjiniring Tbk. (DGIK), PT. Total Bangun Persada Tbk. (TOTL), and PT. Surya
Semesta Internusa Tbk. (SSIA), that make a though competition of the business.
To estimate the success chance of the investment decision-making, there are many tools to analyze
the stock return. Some of the tools to analyze the return of the companies are financial statement
analysis and estimating firm’s value as part of the fundamental analysis. By financial statement
analysis the investors should be able to see the company financial health from the financial
performance track record, the rate return, financial risk involved, competitor’s position, market
situation, and many other factors before making the decision. While from the firm’s value, the
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investors could see whether the firm is over value or under value compared to the current market
situation to strengthen the research as the additional analysis in investing. The conclusions will
shows the investor to be more informed about their investing decision, and it will also shows the
worthiness of investing on this sector
Literature Review
Financial Statement Analysis Overview
The main function of a financial statement is to provide financial information about a company to
any interested parties. Generally, there is wide information about a company performance that
could be obtained from the company financial statement. According to Ikatan Akuntan Indonesia
(IAI) (2007) financial statement is part of financial reporting. It shows the company financial
condition on a periods based from the historical company financial data. It shows the company’s
wealth, capital, liability, profit, loss, operational, stockholders, and transactions. Mainly, a financial
statement provides the company’s financial performance that will be used as the base for the user
decision-making related with the company’s economic condition. A good financial statement
consists of five principles. Which are, balance sheets, income statement, cash flow, Statement of
Changes in equity, and footnotes.
Common Size Financial Statements
Stephen A.Ross (2010) stated that to get the analysis of a financial statement is to compare it with
similar companies. The problem may occur when comparing a company financial statement analysis
is the difference size of financial statement. One useful way to standardize the size is by compare
the value of it with percentage instead of using currencies. This method is usually called with
common-size financial statements. The Common size financial statement analysis is divided into
common size of balance sheet and common size of income statement, according to Sharma (2012)
Common Size Statement is an ideal tool for comparing financial statement of different sizes
companies.
Financial Ratio Analysis Overview
In accordance to (Horne, 2008) financial ratio is one of the tools used to assess the financial
condition and performance. To get the valuable insight from a financial statement could be derived
from the analysis of the numbers on the financial statement, which is analyzing the financial ratio of
the company; it’s a major tool used for the investment decision based on a company financial report
analysis, because it will evaluate various aspect of firm’s financial condition through the value on the
financial statement. Furthermore, Gitman (2009) divides financial ratios into five basic categories,
which are: liquidity, activity, debt, profitability, and market ratios. Liquidity, activity, and debt ratios
primarily measure risk. Profitability ratios will measure the return. While, market ratios will capture
both of risk and return on the company. The ratio gives valuable insight into the health of a firm, the
financial condition and profitability. Financial ratio relates two pieces of financial data by dividing
one quantity to another. The financial health could affect investor’s interest to invest on the
company. The financial ratios growth on a period could be evaluated to predict the company’s
financial trend. One of the tools used to measure of a company growth is calculating the company’s
compound growth analysis rate (CAGR).
Compound Annual Growth Rate
By calculating CAGR the performance growth could be determined through dividing the ending
value to the beginning value.
Equation 1: CAGR
Liquidity Ratio
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Makarim and Noveria / Journal of Business and Management, Vol.3, No.7, 2014: 800-812
Current Ratio
“A measure of liquidity calculated by dividing the firm’s current assets by its current liabilities. A higher
current ratio indicates a greater degree of liquidity”.
Equation 2: Current Ratio
Quick Ratio
“Quick ratio or acid test ratio is a measure of liquidity calculated by dividing the firm’s current assets
minus inventory by its current liabilities”. Generally it is similar with current ratio, except it excludes
inventory.
Equation 3: Quick Ratio
Activity Ratio
Total Asset Turnover
“Total Asset Turnover indicates the efficiency with which the firm uses its assets to generate sales”.
Equation 4: Total Asset Turnover
Inventory Turnover
“Inventory turnover measures the activity, or liquidity, of a firm’s inventory”.
Equation 5: Inventory Turnover
Average Collection Period
“The average amount of time needed to collect accounts receivable. It is useful in evaluating credit and
collection policies”.
Equation 6: Average Collection Period
Debt/Leverage Ratio
Debt Ratio
“Measures the proportion of total assets financed by the firm’s creditors”. The higher this ratio, the
greater the amount of other people’s money used to generate profits.
Equation 7: Debt Ratio
Long-Term Debt to Capital
“Long-term debt to capital ratio is determining the degree of reliance by a company to finance its dayto-day operations”.
Equation 8: Long-term debt to capital
Time Interest Earned Ratio
“Measures the firm’s ability to make contractual interest payments; sometimes called the interest
coverage ratio” .
Equation 9: Times Interest Earned Ratio
Profitability Ratio
Gross Profit Margin
“Measures the percentage of each sales dollar remaining after the firm has paid for goods”.
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Makarim and Noveria / Journal of Business and Management, Vol.3, No.7, 2014: 800-812
Equation 10: Gross Profit Margin
Operating Profit Margin
“Measures the percentage of each sales dollar remaining after all costs and expenses other than
interest, taxes, and preferred stock dividends are deducted” . (“Pure profits” earned on each sales
dollar).
Equation 11: Operating Profit Margin
Net Profit Margin
“Measures the percentage of each sales dollar, remaining after all costs and expenses, including
interest, taxes, and preferred stock dividends, have been deducted”.
Equation 12: Net-Profit Margin
Return on Asset
“Return on Assets (ROA) measures the overall effectiveness of management in generating profits with
its available assets”.
Equation 13: ROA
Return on Equity
“Return on equity (ROE) Measures the return earned on the common stockholder’s investment in the
firm”.
Equation 14: ROE
Earnings Per share
“Earnings per share (EPS) represent the number of dollars earned during the period on behalf of each
outstanding share of common stock” .
Equation 15: EPS
Market Ratio
Price/Earnings (P/E) Ratio
“P/E Ratio measures the amount that investors are willing to pay for each dollar of a firm’s earnings”. A
high P/E ratio will increase the investor confidence to invest on the company
Equation 16: P/E Ratio
Comparing Company Financial Ratio
On analyzing multi companies financial ratios, the ratios of each company should be differ one to
each other. The different will be needed as the base to decide the lead company between the
comparisons; it will ease the decision for investors to invest on a company among similar
companies. Gitman (2009) states two main types of ratio comparisons, which are: cross-sectional
analysis and time-series analysis.
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Cross Sectional Analysis is a comparison of different firms financial ratios at the same point in time.
Frequently, it compares the firm’s ratios to those other firms in its industry or to the industry
averages (Gitman, Principles of Managerial Finance, 2009).
Time series analysis By using time series analysis could be obtained whether the company
performance falling, rising, or stay constantly over a time period. Intra and intercompany
comparison also could be done with time series technique.
The use of DuPont System Analysis
DuPont system analysis is the system used to analyze the firm’s financial statements and to assess
its financial condition. (Gitman, 2009). Furthermore, DuPont system of analysis decomposes return
on net operating assets into two multiplicative components: profit margin and asset turnover. Prior
research has found that a change in asset turnover is positively related to future changes in earnings.
The DuPont system analysis will merge the income statement and balance sheet of the company to
two summary measures of profitability, which is Retun on Assets (ROA) and Return on Equity (ROE).
This system identifies profitability as being impacted by three different methods, which are
earnings, turnings, and leverage, or net profit margin, total asset turnover, and equity multiplier.
Equation 17: ROA & ROE DuPont Formulation
Company Valuation Analysis Theories
Aswath Damodaran (2002) stated on his little book of valuation that valuation is one of the
important things in financing. By knowing the value of an asset it may not be guarantee a success on
investing. But it will help the investors to make more informed decision.
Market Approach
Based on the research of Robert F Reilly (2012), market approach is commonly operated because it
used the real market value as it main indicator. Generally, the result of this approach will determine
the firm’s share price, assigned by comparing numerous aspects of the company to similar aspect of
other companies that the market value already has established. As stated by Damodaran (2002), the
best comparable companies are the one who has the cash flow, growth potential, and risk similar to
the valued company. Considerably stated that market ratios will be much used to value a company
in relations to its risk and return condition on the real market.
Equation 18: Estimating share Price using Market Approach
Methodology
Problem
Identification
Research Objective
Literature Review
Result & Conclusion
Data Analysis
Data Collection
Figure 1: Research Methodology
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Problem Identification: Explain the problem identification and research scope and limitation based
on the case background
Research Objective: Explain the theories used to reach the main purpose of this research
Data Collection: The data gathering process that related with the main research topic
Data Analysis: The analyzed and calculated data as the core of this research
Result & Conclusion: Shows the result of this research objective and conclude it to answer the
entire research problem
Data Collection & Analysis
In this research, the author used the annual report data of PT Adhi Karya, PT Wijaya Karya, PT Nusa
Konstruksi Enjiniring, PT Total Bangun Persada, and PT Surya Semesta Internusa from 2009 to 2013.
The data was obtained from Indonesia Stock Exchange official website. There are several steps used
on this research. For the company performance assessment, the methods used are financial ratios
calculation; the author will only discussed the profitability and market ratios due to the relation with
the return of the company. DuPont analysis is used to examine the companies’ financial statement
to measure the profitability. The financial ratio comparison will be operated by time-series analysis
to evaluate the trend situation of the companies and cross-sectional analysis or benchmarking to
the industry average. The industry average data are gathered from (www.reuters.com) the author
also used financial statement analysis, or common-size financial statement, and finding the CAGR of
the company’s income statement. For the company valuation, market approach will be operated.
Trend Analysis
Table 1. Financial ratio of PT Adhi Karya (Persero) Tbk
PT ADHI KARYA (persero) Tbk.
Liquidity
Leverage /
Solvency
Activity
Profitability
Market
Financial Ratios
Current Ratio
Quick Ratio
Total Debt Ratio
Times Interest Earned Ratio
Long Term Debt to Capital
Inventory Turnover
2009
1.20
1.17
0.87
4.98
0.10
57.37
2010
1.14
1.13
0.83
5.13
0.12
80.37
2011
1.10
1.09
0.84
4.74
0.04
86.94
2012
1.24
1.22
0.85
5.94
0.11
57.24
2013
1.39
1.37
0.84
7.62
0.17
53.27
Total Asset Turnover
Average Collection Period (days)
Gross Profit Margin
Operating Profit Margin
Net Profit Margin
1.37
85
9.75%
6.96%
2.11%
1.15
107
13.55%
9.71%
3.35%
1.10
90
11.93%
6.18%
2.73%
0.97
112
13.68%
6.71%
2.80%
1.01
101
Earnings per Share (EPS)
Return on Assets (ROA)
Return on Equity (ROE)
P/E Ratio
94.20
2.89%
22.28%
4.35
107.83 103.64 117.46 225.38
3.86% 2.99%
2.71%
4.20%
22.09% 18.45% 18.06% 26.38%
8.44
5.60
14.98
6.70
12.73%
8.40%
4.17%
Overall, in the trends of this company shows a positive trend, reflected by the increase from 2009 to
2013. In terms of profitability the company able to manage the increase mainly the success factor of
the increased profitability-ratio on this company is because of the increasing net sales that affecting
the net income of the company from many construction projects associated to the company’s
expanded business line. Not only construction as the core business, but now the company also
engages on the engineering Some of the company’s projects on 2013 are the construction of Ngurah
Rai Airport, Terminal 3 Soekarno-Hatta Airport, power plant at Kalimantan & Lampung, port
Tanjung Priok, and Gede Bage Stadion Bandung. The improvement of company’s earning turns the
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Makarim and Noveria / Journal of Business and Management, Vol.3, No.7, 2014: 800-812
investors confidence to buy the company’s stock that will relate to the P/E ratio on the market side.
Except on 2013 due to the instability of IDR value to the global currency.
Table 2. Financial ratio of PT Wijaya Karya (Persero) Tbk
PT Wijaya Karya (persero) Tbk.
Liquidity
Leverage /
Solvency
Activity
Profitability
Market
Financial Ratios
Current Ratio
Quick Ratio
Total Debt Ratio
Times Interest Earned Ratio
Long Term Debt to Capital
Inventory Turnover
Total Asset Turnover
Average Collection Period (days)
Gross Profit Margin
Operating Profit Margin
Net Profit Margin
Earnings per Share (EPS)
Return on Assets (ROA)
Return on Equity (ROE)
P/E Ratio
2009
2010
2011
2012
2013
1.44
1.41
1.14
1.10
1.10
1.14
1.17
0.97
0.93
0.94
0.73
0.71
0.73
0.74
0.74
9.37
49.69
41.65
23.34
18.99
0.11
0.12
0.12
0.15
0.16
5.71
6.32
8.00
7.82
9.44
1.16
0.96
0.93
0.90
0.94
75
86
88
74
49
9.80% 11.18% 11.17% 11.32% 13.32%
7.36% 7.93% 8.44% 8.61% 10.23%
3.13% 5.17% 5.05% 5.15% 5.25%
33.37
50.15
60.59
76.00
92.92
3.62% 4.95% 4.70% 4.62% 4.96%
13.47% 17.28% 17.62% 17.95% 19.35%
9.74
13.56
10.07
19.47
17.00
Generally, the financial ratio condition of PT Wijaya Karya (persero) Tbk shows some decent
improvement from 2009 to 2013, in the terms of profitability and market ratio the company seems
to have a steady growth for the past 5 years. Some of the strategies used on this company to keep
the growth of its net income are carefully selecting market, by only select government and state
owned enterprise (SOE) projects, maintaining the liquidity asset through centralized financing and
the self-financing strategy project policy, and efficiency in all aspects. Also, The Company able to
maintain a good relation with foreign investors and the main suppliers of the business. On the
market side, The P/E ratio seems to be growing each year, except on 2011 and 2013 due to the
decreasing market share price. It determine at that time, the investor is not confident enough to buy
the stock because some factor like the decreasing company financial performance, economic issue
related with the sector, or the instable IDR value to the global currency.
Table 3. Financial ratio of PT Nusa Konstruksi Enjiniring Tbk
PT Nusa Konstruksi Enjiniring Tbk.
Liquidity
Leverage /
Solvency
Activity
Profitability
Financial Ratios
Current Ratio
Quick Ratio
Total Debt Ratio
Times Interest Earned Ratio
Long Term Debt to Capital
Inventory Turnover
Total Asset Turnover
Average Collection Period (days)
Gross Profit Margin
Operating Profit Margin
Net Profit Margin
Earnings per Share (EPS)
Return on Assets (ROA)
2009
2010
2.04
1.53
n/a
1.53
0.39
0.50
4.20
4.30
0.03
0.01
n/a
2142.40
0.86
0.69
21
57
13.78% 14.10%
9.83% 9.92%
5.18%
5.21%
12.09
12.78
4.47% 3.60%
805
2011
2012
2013
2.30
1.78
1.56
2.12
1.58
1.38
0.35
0.43
0.50
3.61
5.56
3.96
0.05
0.04
0.03
11.46
7.94
7.09
0.74
0.69
0.69
62
79
87
12.04% 13.48% 12.82%
5.54%
6.17%
5.55%
0.73%
3.90% 4.55%
1.45
8.60
11.97
0.54% 2.70%
3.15%
Makarim and Noveria / Journal of Business and Management, Vol.3, No.7, 2014: 800-812
Market
Return on Equity (ROE)
P/E Ratio
7.28%
7.20
7.27%
11.43
0.83%
61.48
4.71%
16.75
6.23%
12.53
The financial ratio trend of PT Nusa Konstruksi Enjiniring Tbk, which formerly is PT Duta Graha
Indah Tbk at 2010, shows some trend decline for the past 5 years. The net income was fluctuated a
lot because of the high price of raw materials used or processing cost. While the price of the
materials gone up, the net income could be decreased due to insignificant revenue growth of the
company from the decreased project contracts when compared to its cost of sales or operating
expenses. Though the company faced a decline trend from 2009 to 2013, the company still able to
generate profit for the past 5 years by focused on building construction. On 2011, the company
financial condition was critically affected by the financial crisis in Eurozone and the weakened
United States economy at that period. Arisen from the hard time in 2011, PT Duta Graha Indah Tbk,
rebranding the company’s name into PT Nusa Konstruksi Enjiniring Tbk. The company now more
focused on private sector across the country due to the rapid development of private sector in
Indonesia construction market at that time. By focusing on Private-sector Companies the company
succeed to keep the profitability ratio growth increase until 2013. As for the market ratio, the
financial crisis on 2011 affecting a high rising on price per earning ratio, it grown into 61.48 in 2011
compared to 11.43 on 2010. Even though the higher P/E ratio is better, the significant growth of P/E
ratio in 2011 suspected to be a stock market bubble due to low net income at that time. Through the
net income increase on 2012, the company finally able to manages the net income to be increasing
on 2012 and 2013, so the P/E ratio able to back to its fair value.
Table 4. Financial ratio of PT Total Bangun Persada (Persero) Tbk
PT Total Bangun Persada (Persero) Tbk.
Liquidity
Leverage /
Solvency
Activity
Profitability
Market
Financial Ratios
Current Ratio
Quick Ratio
Total Debt Ratio
Times Interest Earned Ratio
Long Term Debt to Capital
Inventory Turnover
Total Asset Turnover
Average Collection Period (days)
Gross Profit Margin
Operating Profit Margin
Net Profit Margin
Earnings per Share (EPS)
Return on Assets (ROA)
Return on Equity (ROE)
P/E Ratio
2009
1.54
n/a
0.62
69.68
0.01
n/a
1.34
68
9.85%
5.32%
3.01%
19.15
4.04%
10.59%
7.83
2010
1.51
n/a
0.65
2011
1.40
1.40
0.64
2012
1.44
1.44
0.66
2013
1.58
1.43
0.63
174.51
314.63 346.76 568.26
0.05
0.04
0.06
0.08
n/a
2348.29 11.11
10.02
0.97
0.83
0.89
1.03
98
96
87
82
12.73% 16.12% 19.05% 19.26%
6.57% 10.97% 13.14% 12.68%
5.23%
7.87%
9.91% 9.32%
25.37
36.61
51.51
56.98
5.07%
6.51%
8.80%
9.57%
14.44% 18.33% 25.75% 26.03%
10.05
7.78
17.47
8.78
Overall, the financial ratio trend of PT Total Bangun Persada (persero) Tbk appears to be increased
from 2009 to 2013. The profitability ratio shows a steady growth year by year. The components of
the profitability ratio, which are net sales, gross profit, operation income, net income, total assets,
and the equity of this company also increased every period on the past 5-year. The company
focused on growing the net income to 15% per year by targeting on high-rise building construction.
The company also maintains the net sales by prioritizing the repeated contract order from its
satisfied current customers. For the market ratio, the Price per earning ratio seems to be fluctuated,
it increased on 2010 and 2012, and decreased on 2011 and 2013.
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Makarim and Noveria / Journal of Business and Management, Vol.3, No.7, 2014: 800-812
Table 5. Financial ratio of PT Surya Semesta Internusa Tbk
SSIA
Liquidity
Leverage /
Solvency
Activity
Profitability
Market
Financial Ratios
Current Ratio
Quick Ratio
Total Debt Ratio
Times Interest Earned Ratio
Long Term Debt to Capital
Inventory Turnover
Total Asset Turnover
Average Collection Period (days)
Gross Profit Margin
Operating Profit Margin
Net Profit Margin
Earnings per Share (EPS)
Return on Assets (ROA)
Return on Equity (ROE)
P/E Ratio
2009
2010
1.08
1.02
1.07
1.01
0.66
0.64
2.07
3.75
0.33
0.28
212.04 187.45
0.66
0.71
88
98
23.43% 28.31%
5.81% 9.52%
3.65% 8.30%
14.96
98.26
2.42% 5.89%
7.15% 16.15%
4.68
2.37
2011
1.67
1.66
0.59
8.48
0.30
253.74
0.98
82
27.18%
15.84%
9.66%
54.72
9.47%
23.16%
13.16
2012
1.73
1.63
0.66
14.19
0.29
13.85
0.73
39
36.35%
26.35%
20.72%
150.31
15.21%
44.24%
7.19
2013
2.01
1.76
0.55
7.39
0.23
7.11
0.79
69
28.81%
21.24%
16.29%
147.41
12.84%
28.59%
3.80
For the last 5 years, the financial ratio trend of PT Surya Semesta Internusa Tbk, shows a positive
trend. The company seems has a good capability in generating profit reflected on the increased
profitability ratio. The growth of company’s profit was also because of the company focus on the
sales of industrial land blocks and the construction of high-rise buildings. The company was selected
to be the main contractor of Cikampek-Palimanan toll road project on 2012 that makes the
company got a significant improvement in profitability ratio. On the market side, the P/E ratio of
this company seems to fluctuate a lot, though the company shares always increasing for the past 5
years. The share’s price is also increasing until it hits it highest point on 2012 at IDR 1,080/share, but
decreased on 2013 at IDR 580 due to the internal problem of increased interest rate
Growth Rate Comparison
Table 6. Compound Annual Growth Rate Comparison
Year 2009 - 2013
Net Sales
Cost of Good Sold
CAGR
ADHI
WIKA
6.16% 15.88%
5.08% 15.34%
DGIK
3.05%
3.07%
TOTL
7.22%
4.35%
SSIA
32.56%
30.17%
Gross Profit
Total Operating Expense
13.50%
11.21%
25.14%
22.96%
1.19%
20.00%
26.79%
37.91%
39.58%
14.40%
Operating Income
14.38% 25.84%
-10.69%
19.26%
83.32%
Other Income
Profit Before Income Tax
-2.19%
21.13%
7.81%
30.73%
34.60%
1.41%
-21.72%
29.20%
-23.85%
68.38%
Income tax
Net Income
16.02% 29.02%
25.94% 31.86%
4.15%
-0.24%
10.24%
42.27%
28.58%
92.67%
From the comparison, ADHI, WIKA, TOTL, and SSIA seems to managed generate positive growth
rate of net income due to the good growth rate of the companies’ net sales compared to the COGS
rate, operating expense, other income or expense, and the income tax. The good growth rate of net
sales could be affected from the increase in work contract, in this case the construction work sales
increase as the impact of the government MP3EI project to support the realization of Indonesia as a
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developed country and also as the rise of Indonesia population, which foresees a high demand for
residential and any other infrastructures as well the commercials development due to the stability of
economic growth recovered from the global economic crisis on 2009. The increasing net sales will
impacted the material use to get the work done, that define the increase in cost of good sold
(COGS) used. The companies cost of good sold also show a positive amount that nearly even to the
net sales. The high amount of COGS may occur due to the increased price of raw materials as the
instability of Indonesia Rupiah value to the global currency and the Eurozone and United States,
which also impacted by the sharp rise on oil prices, the raw materials like asphalt, glass, and cement
rise up to 20% at 2011. The COGS use will affecting the operating expense in which the companies
show the positive amount due to the high COGS price. In managing the operating income and net
income from the expenses and tax, the companies succeed to generate profit as shown on the
positive value of the income growth rate, except for DGIK. The minus income shown on DGIK
occurred due to the higher price of COGS compared to the net sales of the company and high
operating expense compared to the gross profit. Overall, a good growth rate of companies’ net sales
will result in a good profit if the company able to manage the use of COGS and operating expense
for the sales production.
Cross-Section Analysis
Table 7. Cross-Section Comparison (2013)
CROSS-SECTION (Year of 2013)
Financial Ratios
Liquidity
Leverage /
Solvency
Activity
Profitability
Market
Industry
Average
ADHI
WIKA
DGIK
TOTL
SSIA
Current Ratio
1.95
1.39
1.10
1.56
1.58
2.01
Quick Ratio
1.52
1.37
0.94
1.38
1.43
1.76
Total Debt Ratio
n/a
0.84
0.74
0.50
0.63
0.55
Times Interest Earned Ratio
20.16
7.62
18.99
3.96
568.26
7.39
Long Term Debt to Capital
n/a
0.17
0.16
0.03
0.08
0.23
Inventory Turnover
14.59
53.27
9.44
7.09
10.02
7.11
Total Asset Turnover
0.74
1.01
0.94
0.69
1.03
0.79
Average Collection Period
n/a
101
49
87
82
69
Gross Profit Margin
32.58
12.73%
13.32%
12.82%
19.26%
28.81%
Operating Profit Margin
13.85
8.40%
10.23%
5.55%
12.68%
21.24%
Net Profit Margin
8.85
4.17%
5.25%
4.55%
9.32%
16.29%
Earningsper Share (EPS)
103.23
225.38
92.92
11.97
56.98
147.41
Return on Assets (ROA)
5.42
4.20%
4.96%
3.15%
9.57%
12.84%
Return on Equity (ROE)
11.13
26.38%
19.35%
6.23%
26.03%
28.59%
P/E Ratio
28.22
6.70
17.00
12.53
8.78
3.80
= Industry average value
= Highest value of the group and higher than the industry average value
= Highest value of the group, lower than the industry average value
= Lowest value of the group
Overall, though each company has a different capability in control the financial condition of the
company, Indonesian construction Sector Company on 2013 has a well performance in managing
the 10 from 15 aspects of the financial ratios performed above the industry average. SSIA seems to
be the lead of the competitors through 6 of the 10 ratio performed above the industry average is on
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this company, followed by ADHI and TOTL with each 2 ratio performed above the industry average,
WIKA also lead in 2 ratio though it still under the industry average. On the other side, even DGIK is
the leader of the total debt ratio; the company still has the lowest value of ratios compared to its
competitors that indicates that the company did not performed well during the period.
DuPont System of Analysis
Table 8. DuPont System Analysis (2009-2013)
Net Profit Margin
Total Asset Turnover
Equity Multiplier
ROA
ROE
Net Profit Margin
Total Asset Turnover
Equity Multiplier
ROA
ROE
Net Profit Margin
Total Asset Turnover
Equity Multiplier
ROA
ROE
Net Profit Margin
Total Asset Turnover
Equity Multiplier
ROA
ADHI
2.11%
1.37
7.70
2.89%
22.28%
ADHI
3.35%
1.15
5.72
3.86%
2009
WIKA
3.13%
1.16
3.72
3.62%
13.47%
2010
WIKA
5.17%
0.96
3.49
4.95%
DGIK
5.18%
0.86
1.63
4.47%
TOTL
3.01%
1.34
2.62
4.04%
SSIA
3.65%
0.66
2.95
2.42%
7.28%
10.59%
7.15%
DGIK
5.21%
0.69
2.02
3.60%
TOTL
5.23%
0.97
2.85
5.07%
SSIA
8.30%
0.71
2.74
5.89%
22.09%
17.28%
2011
7.27%
14.44%
16.15%
ADHI
2.73%
1.10
6.17
WIKA
5.05%
0.93
3.75
DGIK
0.73%
0.74
1.55
TOTL
7.87%
0.83
2.82
SSIA
9.66%
0.98
2.95
2.99%
18.45%
4.70%
17.62%
2012
WIKA
5.15%
0.90
3.89
4.62%
0.54%
0.83%
6.51%
18.33%
9.47%
27.92%
DGIK
3.90%
0.69
1.75
2.70%
TOTL
9.91%
0.89
2.92
8.80%
SSIA
20.72%
0.73
2.91
15.21%
44.24%
ADHI
2.80%
0.97
6.67
2.71%
ROE
18.06%
17.95%
2013
4.71%
25.75%
Net Profit Margin
Total Asset Turnover
Equity Multiplier
ROA
ROE
ADHI
4.17%
1.01
6.28
4.20%
26.38%
WIKA
5.25%
0.94
3.90
4.96%
19.35%
DGIK
4.55%
0.69
1.98
3.15%
6.23%
TOTL
SSIA
9.32% 16.29%
1.03
0.79
2.72
2.23
9.57% 12.84%
26.03% 28.59%
From the analyzed DuPont formulation system could be stated that the calculation of the
company’s net profit margin has the highest impact to the changes of ROA and ROE. It will then
indicate the return from the companies. On 2011, when the net profit margin of ADHI, WIKA, and
DGIK decrease means that 2011 is not a good year to invest on the companies in risk of lower return,
while afterward when the companies experienced an increase until 2013 is good time to reinvest on
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the companies. For TOTL and SSIA 2009 to 2012 is a good times to invest on the companies due to
the high return from the increased net profit margin. While, 2013 is time to sell the stock in case of a
bit decrease. Though, in 2013 SSIA has more capability in return on investment due to the significant
amount differences among the other companies.
Common Size Financial Statement Analysis
Overall, in terms of common size income statement, all of the companies seems to experienced a
growth on net sales for the past 5 years due to the increase of construction work needed. The
increased net sales will impact to the increased production cost or the cost of goods sold (COGS),
from the calculation, the COGS of the companies take a high proportion in minimum of 80% to the
net sales indicating a high needs of COGS to finish the project contracts. The high amount of COGS
could also be affected from the rose of construction materials price. High COGS will affect an
increase in operating expense that later resulting on the operating income. As for the net income
SSIA able to get a big proportion from the net sales compared to other companies as the company
have many business lines other than construction service. While, ADHI, WIKA, and TOTL were able
to achieve the net income growth every year, except on 2013 when the instability of macroeconomic condition in Indonesia occurred. Unfortunately DGIK appears to be the least company in
terms of generating profit, the net income proportion never gone higher than 5% from the net sales.
In the terms of common size balance sheet, the totals assets and total liabilities plus equity will be
the benchmark base of other balance sheet aspect, included in total assets are total current assets
and total non-currents assets, while the total liabilities plus equity containing total current liabilities
and total non-current liabilities plus the total equity. All of the companies have more percentage
number on their total current assets that indicates the companies’ cash and cash equivalent rising
due to the high net sales as the high demand of construction service, also because of the companies
have high inventories. On the proportion of total liabilities all of the companies have a high amount
of total current liabilities that driven from the increase of tax payable as the increase of net income.
The companies shows a stable growth on the equity proportion of common size balance sheet, that
indicates this sector still have the investors attention to buy the company’s share price or market
stocks as all of the companies are listed company.
Market Approach Valuation
Table 9. Market Approach Valuation
PT. SURYA SEMESTA INTERNUSA Tbk.
P/E Industry
IDR 28.2
Net Income
IDR 746,615,828
Equity Value
IDR 21,069,498,666
Share Outstanding
4,688,521
Share Price
IDR 4,494
Current Price
IDR560
PT. NUSA KONSTRUKSI ENJINIRING Tbk.
P/E Industry
IDR 28.2
Net Income
IDR 66,105,835
Equity Value
IDR 1,865,506,664
Share Outstanding
5,521,729
Share Price
IDR 338
Current Price
150
PT. ADHI KARYA Tbk.
P/E Industry
IDR 28.2
Net Income
IDR 408,437,913
Equity Value
IDR 11,526,117,905
PT. WIJAYA KARYA Tbk.
P/E Industry
IDR 28.2
Net Income
IDR 624,371,679
Equity Value
IDR 17,619,768,781
Share
Outstanding
6,133,950
Share Price
IDR 2,872
Current Price
IDR1,580
Share Outstanding
Share Price
Current Price
1,801,320
IDR 6,399
IDR1,510
PT. TOTAL BANGUN PERSADA Tbk.
P/E Industry
IDR 28.2
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Net Income
Equity Value
Share Outstanding
Share Price
Current Price
IDR 213,168,653
IDR 6,015,619,388
3,410,000
IDR 1,764
IDR500
In accordance to (www.quotes.wsj.com.2014) the current share price of the companies are: PT Adhi
Karya Tbk, amounted to IDR 1,510/share. While, the market value share price calculation of the
company is IDR 6,399/share. The current share price of PT Wijaya Karya Tbk, amounted to IDR
1,580/share. Meanwhile, the market value share price calculation of the company is IDR 2,872/share.
The current share price of PT Nusa Konstruksi Enjiniring Tbk, amounted to IDR 150/share, while, the
market value share price calculation of the company is IDR 338/share. The current share price of PT
Nusa Konstruksi Enjiniring Tbk, amounted to IDR 500/share. Meanwhile, the market value share
price calculation of the company is IDR 1,764/share. Last, the current share price of PT Nusa
Konstruksi Enjiniring Tbk, amounted to IDR 560/share. Meanwhile, the market value share price
calculation of the company is IDR 4,494/share. The different value of both prices in all companies
indicates that the current share price of the company is undervalued due to the higher amount of
the calculated share price using market approach as the expected company value. This means the
company’s share price has the possibilities to increase in the future. The high calculated share price
could be indicated from the high equity value that related with the high net income. As for the
company’s net income experienced an increase from 2012 due to the high project contract received
Conclusions
Based this research could be considered that by analyzing a company’s financial performance, and
calculating the market-valuation of the companies, could be used as the fundamental analysis for
the investors to make an investment decision, because we might see the healthiness of a company
financial condition to predict the future of the company and build the investor confidence to invest
on the company to gain optimal return. And from the analysis, the construction sector in Indonesia
shows a good financial health and undervalued share price. The construction sector net income
really depended on the net sales of the company. Construction sector in Indonesia has nothing to
fear in lose a work contract, because as a development country, Indonesia will keep developing
through many construction project to reach the realization of Indonesia as a developed country, and
also as long as the number of population in Indonesia still rising, the demand of construction service
like residential & hospitality, commercial-development, and any other public infrastructure will be
grown high. The author suggested that the construction sector is the one of the most secure
industry with the condition stated above for the investors to keep investing in. The sector also has
the worthiness to keep investing, as the low share price will give the investors the opportunity of
solid return with the high possibilities of growing up in the future. WIKA, ADHI, and SSIA could be
prioritized as the stock choice for the investors. WIKA with its highest P/E-ratio, ADHI with the
highest earning per share, and SSIA has the steadiest net income.
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